Second quarter revenues rose 11.1% to $54.0 million in fiscal 2014 compared with $48.6 million in the second quarter of fiscal 2013. Second quarter net income increased 6.8% to $6.5 million, or $0.45 per diluted share, compared with $6.1 million, or $0.41 per diluted share, in the second quarter of fiscal 2013.

"CSI's record results for the second quarter benefited from higher processing revenues generated from our core processing customers and record transaction volume from our regulatory compliance services," stated Chief Executive Officer Steven A. Powless. "This quarter marked our 37th consecutive quarter of revenue growth, and our outlook for the second half of fiscal 2014 remains positive based on our pipeline of new business, high contract renewal rates and solid growth in transaction volume."

"Our focus remains on driving revenue growth through our expanded sales and marketing programs," Powless continued. "We increased our sales force as part of our Strategic Growth Initiative (SGI), and it has been successful in expanding our geographic reach to a national presence as well as increasing cross-sales of products and services to existing customers."

During the second quarter, CSI's Board of Directors approved a 14.3% increase in the quarterly cash dividend to $0.16 per share and authorized a $5.0 million increase in the Company's share repurchase program. The increased dividend marked the 25th consecutive year of increasing CSI's cash dividend. The dividend was paid on September 25, 2013, to shareholders of record as of the close of business on September 3, 2013. The increase in the share repurchase program brought the total authorized for share repurchase to $70 million since CSI's share repurchase program was initially announced in March 2004.

Second Quarter Results

Second quarter consolidated revenues rose 11.1% to $54.0 million compared with $48.6 million for the second quarter ended August 31, 2012. Processing revenues increased 10.5% to $34.0 million compared with $30.8 million in the second quarter of fiscal 2013. The growth in processing revenues reflects sales to new customers, cross-sales to existing customers and increases in transaction volumes from existing customers, partially offset by lost business. Second quarter fiscal 2014 processing revenue included $1.2 million in early contract termination fees compared with $51,000 in the second quarter of fiscal 2013. The early termination fees were due primarily to former customers being acquired by other non-customer financial institutions.

Other revenues rose 12.1% to $20.0 million in the second quarter of fiscal 2014 and accounted for 37.1% of total revenues compared with $17.9 million, or 36.7% of total revenues, in the second quarter of fiscal 2013. Other revenue growth benefited from higher sales of Internet and mobile banking services, growth in homeland security and fraud prevention services, higher eBusiness group revenues, and higher forms and envelope revenue within our Document Services Division.

Second quarter operating income rose 9.0% to $10.7 million compared with $9.8 million in the second quarter of fiscal 2013. Operating margin for the second quarter was 19.8% compared with 20.2% in the second quarter of fiscal 2013. The decrease in operating margin was due primarily to the ramp up of expenses related to the SGI launched in fiscal 2012, most of which have been incurred. In addition, expenses increased for equipment and travel related to the build out of our national sales team, increased fees related to growth in our ATM and debit card business, and higher network communications compared with the second quarter of last year.

Net income increased 6.8% to $6.5 million in the second quarter compared with $6.1 million in fiscal 2013. Net income per fully diluted share rose 9.8% to $0.45 in the second quarter of fiscal 2014 compared with $0.41 in fiscal 2013. Weighted average diluted shares outstanding were down 1.6% to 14.5 million for the second quarter of fiscal 2014 compared to the same period of fiscal 2013 due primarily to CSI shares repurchased under the Company's share repurchase program. CSI repurchased 213,676 shares during the first half of fiscal 2014, including 129,606 in the second quarter. CSI had approximately $2.7 million available under existing stock purchase authorizations outstanding as of August 31, 2013.

"CSI's balance sheet remained strong with $3.3 million in cash and no long-term debt at August 31, 2013," Powless said. "We used our strong cash flow to reduce debt, increase CSI's cash dividend, repurchase CSI shares and invest in new hardware and software to support our continued growth. During the second quarter, we invested about $2.2 million in new equipment and software, and we returned $6.0 million to shareholders in cash dividends and stock repurchases."

Six Month Results

Consolidated revenues for the first six months of fiscal 2014 rose 9.5% to a record $105.8 million compared with $96.6 million for the same period in fiscal 2013. CSI's growth in revenues benefited from growth in processing and other revenues.

Operating income rose 7.1% to $20.7 million for the first six months of fiscal 2014 compared with $19.3 million for the same period in fiscal 2013. Operating margin was 19.6% in the first six months of fiscal 2014 compared with 20.0% in the same period of fiscal 2013.

Net income for the first six months of fiscal 2014 rose 4.9% to $12.5 million compared with $11.9 million in the first six months of fiscal 2013. Net income per diluted share increased 6.2% to $0.86 for the first six months of fiscal 2014 compared with $0.81 for the same period of fiscal 2013.

About Computer Services, Inc.

Computer Services, Inc. (CSI) delivers core processing, managed services, mobile and Internet solutions, payments processing, print and electronic distribution, and regulatory compliance solutions to financial institutions and corporate customers across the nation. Exceptional service, dynamic solutions and superior results are the foundation of CSI's reputation, and have resulted in the company's inclusion in such top industry-wide rankings as the FinTech 100, Talkin' Cloud 100 and MSPmentor Top 501 Global Managed Service Providers List. CSI's stock is traded on OTCQX under the symbol CSVI. For more information about CSI, visit www.csiweb.com.

Forward-Looking Statements

This news release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. All statements except historical statements contained herein constitute "forward-looking statements." Forward-looking statements are inherently uncertain and are based only on current expectations and assumptions that are subject to future developments that may cause results to differ materially. Readers should carefully consider: (i) economic, competitive, technological and governmental factors affecting CSI's operations, customers, markets, services, products and prices; and (ii) other factors discussed in CSI's Annual Report, Quarterly Reports, Information and Disclosure Statements and other documents posted from time to time on the OTCQX website (www.otcqx.com), including without limitation, the description of the nature of CSI's business and its management discussion and analysis of financial condition and results of operations for reported periods. Unless required by law, CSI undertakes no obligation to update, and is not responsible for updating, the information contained in this report beyond the publication date, whether as a result of new information or future events, or to conform the statement to actual results or changes in CSI's expectations, or otherwise or for changes made to this document by wire services or Internet services.

COMPUTER SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Unaudited)

(in thousands, except share and per share data)

Three Months Ended August 31,

Six Months Ended August 31,

2013

2012

2013

2012

Processing revenues

$ 34,004

$ 30,777

$ 67,627

$ 61,855

Other revenues

20,026

17,863

38,123

34,748

Total revenues

54,030

48,640

105,750

96,603

Operating expenses

43,311

38,807

85,040

77,264

Operating income

10,719

9,833

20,710

19,339

Interest income (expense)

(11)

(8)

(23)

(10)

Income before income taxes

10,708

9,825

20,687

19,329

Provision for income taxes

4,229

3,759

8,171

7,394

Net income

$ 6,479

$ 6,066

$ 12,516

$ 11,935

Earnings per share

Basic

$ 0.45

$ 0.41

$ 0.86

$ 0.81

Diluted

$ 0.45

$ 0.41

$ 0.86

$ 0.81

Shares used in computing earnings per

common and common equivalent share

Basic

14,511,898

14,718,145

14,563,509

14,721,665

Diluted

14,511,898

14,750,121

14,563,509

14,755,580

COMPUTER SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)

08/31/2013

02/28/2013

08/31/2012

(Unaudited)

(Audited)

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

$ 3,275

$ 499

$ 10,424

Accounts receivable

22,657

21,953

20,575

Income tax receivable

452

797

-

Prepaid expenses and other current assets

8,034

6,625

6,545

Total current assets

34,418

29,874

37,544

Property and equipment, net

35,340

34,996

36,414

Software and software licenses, net

18,240

18,952

18,293

Goodwill

60,115

60,115

60,115

Intangible assets

8,920

9,374

10,009

Other assets

9,858

8,703

8,540

Total assets

$ 166,891

$ 162,014

$ 170,915

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable and accrued expenses

$ 17,646

$ 12,979

$ 14,249

Deferred revenue

8,762

9,337

9,923

Income taxes payable

-

-

37

Notes payable

27

60

84

Total current liabilities

26,435

22,376

24,293

Long-term liabilities

Notes payable

-

7

34

Deferred income taxes

13,193

13,193

11,902

Other long-term liabilities

1,174

1,071

1,128

Total long-term liabilities

14,367

14,271

13,064

Total liabilities

40,802

36,647

37,357

Shareholders' equity

Preferred stock; shares authorized, 5,000,000; none issued

-

-

-

Common stock, no par; shares authorized, 20,000,000 in fiscal 2014 and